A little more than a year after agreeing to join together in an alliance to attack the global truck market, Navistar International Corp. and Volkswagen Truck & Bus are moving quickly to develop new engines, electric trucks and to deploy their combined purchasing might to trim expenses.
In a conversation with Trucks.com, Troy Clarke, Navistar International Corp.’s chief executive, and Andreas Renschler, Volkswagen’s truck chief, said that among the greatest opportunities of their alliance is the ability to build a global connected vehicle platform across their combined brands.
The alliance is the result of an agreement reached last year where Volkswagen purchased 17 percent of Navistar for $256 million and gained two seats on the Lisle, Ill. truck company’s board of directors. The deal closed March 1.
Close alignment has spurred speculation that the companies will merge, but for now both executives are focused on making the alliance, as currently conceived, as effective as it can be. Navistar, for example, expects cumulative synergies to reach $500 million in savings over the first five years.
Navistar’s stock has soared since the deal was announced, rising from $19.79 a share after plans for the alliance were first announced in September 2016 to close at $41.68 on Wednesday, a 111 percent gain.
Here are some of the endeavors they are working on.
Partnering with Navistar in making a big push into the electric market “makes a lot of sense” in last-mile deliveries, said Renschler, especially in the medium-duty truck and bus segments. “But it’s not for long distance,” Renschler said. For now, long-haul trucking will be the domain of diesel engines.
He sees electric trucks as useful for urban delivery vehicles up to the heaviest Class 8 weight segment.
When people think of delivery, they have to look beyond small parcels and boxes. Ecommerce has changed that, Clarke said.
“It’s refrigerators, it’s television, it’s furniture,” Clarke said. “All of these things you can buy in eCommerce today,” Clarke said.
Their plan is to launch their first electric-powered medium-duty trucks in the U.S. and Canadian markets in late 2019 or early 2020.
But don’t expect a rapid transformation of trucking.
“Ours is an industry that adopts change at a very deliberate fashion,” Clarke said. “And even the most advantageous technology, like the automated manual transmission, or electronic stability control, were actually adopted over really extended periods of time.”
Volkswagen Truck & Bus announced in October that it will invest $1.7 billion in research and development of electric drivetrains, autonomous software and cloud-based software. To help defray costs, Navistar will also adopt the electric drivetrain.
Prior to the alliance, electric powertrains were not on Navistar’s radar, Clarke said.
However, since the alliance launched, engineers and leadership from both sides have been working together and developing “meaningful dialogs” on the issue, Clarke said.
An October alliance leadership conference in Chicago brought together the top 90 executives of Navistar and Volkswagen Truck & Bus, the commercial vehicle division of the German automaker, for the first time to discuss such initiatives and map out a North American sales strategy.
“Besides all of the new technology, we are in the people business,” Renschler said. “It’s important that they know each other, work with each other.”
The alliance, which includes Navistar’s 350,000 connected vehicles with the 300,000 that Volkswagen Truck & Bus has, will bring together the “largest connected-vehicle platform in the world,” Clarke said.
It will include Navistar’s International line of trucks. Volkswagen is bringing its nameplate and its subsidiary MAN and Scania truck brands.
The companies’ cloud-based telematics systems will allow customers to diagnose potential problems with the trucks before serious problems occur, which increases productivity and lowers the total cost of ownership.
“We can utilize this with a common platform around the world without any further development costs,” Renschler said.
The partnership and the new technologies that have recently been introduced will “strengthen all the brands that are in our portfolio,” he said.
The Future of Diesel Fuel
While some nations and regions are considering banning diesel fuels and internal combustion engines, the truck executives don’t expect the fuel to disappear any time soon.
“I personally think diesel will be a very strong fuel for a long time,” Clarke said. “These are heavy-duty trucks, they are designed to have a million-mile life, and they’re on the road for at least 10 years. Even if we stopped producing them tomorrow, we are going to have these trucks, there will be a need for diesel fuel for quite a while.”